November/December 2010 Issue
Civil Cases
Athletic Training Innovations, LLC v. L.A. Gear, Inc.,
2010 WL 4103309 (E.D. La. Oct. 18, 2010)
ABSTRACT
Defendant sent a cease-and-desist letter to the Louisiana-based plaintiff as well as to several of plaintiff’s customers in other states, alleging a likelihood of confusion with its CATAPULT mark for shoes. Plaintiff sued for unfair competition and related claims in Louisiana arguing among other things that the asserted CATAPULT mark had been abandoned years earlier. The Eastern District of Louisiana found that a cease-and-desist letter sent to the alleged infringer, i.e., plaintiff, in Louisiana may not have supported personal jurisdiction without more because such a rule could unfairly restrict a trademark holder’s ability to enforce its rights. The court further held, however, that sending
cease-and-desist letters to plaintiff’s customers in other states created sufficient minimum contacts with Louisiana, as it intentionally caused them to cancel their orders with plaintiff. The court also found that plaintiff’s allegations that defendant wrongfully asserted an abandoned trademark stated a claim for unfair competition.
CASE SUMMARY
FACTS
Plaintiff Athletic Training Innovations, LLC (“Athletic”), a Louisiana company, is the manufacturer of the KATAPULT training shoe designed to improve athletic skills such as sprinting and jumping. Defendant L.A. Gear, Inc. (“LA Gear”), a California corporation, had manufactured and sold a high-end basketball shoe in the 1980s and 1990s under the mark CATAPULT. Although it has not sold or actively marketed the shoe since 2004, LA Gear renewed its registration for the CATAPULT mark in 2009. In 2010,
LA Gear sent a cease-and-desist letter to Athletic stating that Athletic’s use of the KATAPULT mark was likely to cause confusion with LA Gear’s CATAPULT mark. LA Gear sent similar cease-and-desist letters to Athletic’s largest customers, which prompted them to cancel their KATAPULT orders.
Athletic filed suit, alleging among other claims that LA Gear had (1) engaged in unfair competition under the Lanham Act and state law, (2) abandoned its CATAPULT trademark, and (3) renewed its CATAPULT trademark registration through false statements. LA Gear moved to dismiss the complaint, asserting a failure to state a claim and lack of personal jurisdiction.
ANALYSIS
The court rejected LA Gear’s arguments, holding that it had personal jurisdiction over LA Gear and that Athletic had sufficiently pleaded its claims.
LA Gear argued that it had no contacts with Louisiana except for the cease-and-desist letter it sent to Athletic, which could not form the basis for personal jurisdiction in Louisiana. LA Gear pointed out that the other cease-and-desist letters were directed to Athletic’s customers in Colorado and Pennsylvania.
While the court agreed that a cease-and-desist letter sent to Athletic in Louisiana alone may not have supported personal jurisdiction, it found that the cease-and-desist letters sent to Athletic’s customers had foreseeable effects in Louisiana, because LA Gear knew that Athletic is a Louisiana company and because it intended with those letters to prevent Athletic from retaining customers. The court found that LA Gear thereby purposefully directed its activities against a Louisiana resident, which had the foreseeable effect of causing business activity in the forum state of Louisiana. The court also rejected LA Gear’s argument that exercising personal jurisdiction would unfairly restrict LA Gear’s ability to protect its trademark rights and thus “violate traditional notions of fair play or substantive justice.” The court emphasized that LA Gear could have avoided personal jurisdiction in Louisiana if it had only sent a cease-and-desist letter to Athletic and, if not satisfied with the response, had brought a trademark-infringement action in a court with proper jurisdiction. On the other hand, sending
cease-and-desist letters to Athletic’s customers was “abusive in light of the other option available to [LA Gear],” and therefore distinguished this case from others holding that a cease-and-desist letter to the alleged infringer alone does not support personal jurisdiction. Considering other personal-jurisdiction factors, the court also found that it was not more burdensome for LA Gear to litigate this case in Louisiana than it would be for Athletic to litigate in California (LA Gear’s preferred forum), Louisiana has an interest in protecting local businesses, and there was no outstanding litigation in another forum.
The court rejected LA Gear’s motion to dismiss for failure to state a claim, finding that Athletic had sufficiently alleged that LA Gear had asserted ownership of an abandoned mark and claimed a likelihood of confusion in the cease-and-desist letters that it sent to Athletic’s customers, assertions that were allegedly baseless and false. Moreover, Athletic argued that LA Gear's statements in fact deceived Athletic’s customers who, in response, cancelled their orders with Athletic. The court rejected LA Gear's argument that it was entitled to warn customers of an alleged infringer that they may be liable for infringement and therefore had not sent those letters in bad faith.
The court also found that Athletic had sufficiently pleaded its deceptive practices claim under state law and its claim of abandonment under the Lanham Act.
Finally, the court rejected LA Gear’s argument that Athletic had not sufficiently pleaded its claim for false procurement of a trademark registration because it did not show that LA Gear knowingly made a false statement regarding a material fact. The court agreed with Athletic that it was not required to plead the formulaic elements of a cause of action and did not have to specifically plead that LA Gear knew its statement to the PTO was false, as long as sufficient facts were provided that, if true, would entitle Athletic to the requested relief. The court held that a fact-finder could infer the required mental state (i.e., intent) from the circumstances based on Athletic’s allegation that LA Gear informed the PTO in its 2009 renewal application that it was continuously using the CATAPULT trademark when in fact it had not been used since 2004.
CONCLUSION
This case highlights the jurisdictional risk of sending cease-and-desist letters to parties other than the alleged trademark infringer, particularly its customers. Such letters may expose the sender to personal jurisdiction in the alleged infringer’s forum, where a cease-and-desist letter sent only to the alleged infringer might not support such jurisdiction.
